Term insurance plans are a simple form of life insurance that secures the life of the policyholder for a specific period. One of the major advantages of purchasing an online term policy is that it offers a high sum assured at an affordable premium. There are no other insurance plans in the market that can offer high premiums at an economical premium. Therefore, term insurance is one of the most reputable investment instruments available in the market today.
However, the life insurance term plan only offers death benefits. If the policyholder unfortunately passes away, then the nominee of the policy will receive the death benefits (sum assured). A term policy does not provide any survival benefit. Here, if the policyholder outlives the tenure of the policy then he/she will not receive any maturity or survival benefit. It is one of the major drawbacks of this policy. However, to counter such a drawback of a term plan, the term insurance with return on the premium (TROP) was introduced in the market. Popularly known as TROP, this plan is ideal for people who are looking for death as well as maturity benefits.
What is TROP?
TROP is a type of term insurance policy that offers dual benefits. It secures the life insurance of the policyholder as well as provides the return of premium. In such a case if the policyholder outlives the tenure of the policy, then he/she will receive back the total premium paid to date during maturity.
Important things to know about TROP
- The premium paid towards TROP is a bit higher when compared to that of the traditional term plan.
- You are not entitled to receive interest on the survival benefit
- If you purchase additional riders with a TROP, then the premiums paid towards the riders will not be included in the survival benefit that you will receive during maturity
- The survival benefit that you receive on maturity is the total of the premium paid throughout the tenure of the policy
There are numerous benefits of investing in TROP. However, it becomes important to compare the pros and cons of TROP with traditional term insurance. You can use a term insurance calculator here to compare the features, terms, and premiums, and decide the one that meets your requirements.
Differences between term plan and TROP
- Purpose of the plan: The purpose of the term insurance plans is to provide life cover whereas TROP provides life cover as well as maturity benefit.
- Return: The term insurance plan does not provide any returns. On the contrary, you will receive maturity benefits in the form of the total of premium you had paid throughout the term of the policy.
- Premium: The premium of the term plans is usually 0.1% of the life cover. On the other hand, the premium of TROP is costly when compared to the premium of the term plan. TROP premiums are usually two to three times higher than that of the term plans.
- Tax benefits: If you are looking for a tax saving instrument then it is advisable to purchase a term plan. If you are looking for maturity benefits then a TROP plan is ideal, but they do not provide any benefits under section 80/C and 10(10D) of the Income Tax Act 1961.
While purchasing insurance it is advisable to buy an online term plan, as it is cost-effective when compared to the traditional methods of buying via insurance agents. Besides this, purchasing an online term plan is convenient, as you can buy them from the comfort of your home.
